As I commented in my monthly market report earlier this week, inventory has declined significantly (15%) over the past year!



Why is inventory dropping so much???

I have a theory....

First and foremost, I believe there are quite a few homeowners who are deciding to lease their properties instead of selling them, after having had little success in the sales arena.  I have seen this quite frequently over the past 6 months, and it makes sense --- leasing the property can provide a stream of income with which to pay the mortgage payment.  Leasing a property also gets the homeowner down the road a bit (perhaps a year or two) after which they can try to sell again in a market this has hopefully improved.

Second, I believe some sellers are either pulling their property off the market, or never putting them on the market, because they don't believe they can sell their home right now for a price that would either: a) make them happy, b) payoff their mortgage, or c) allow them to move into their next home.

Finally, after six years of steady increases in foreclosures in our local market, that trend finally reversed itself in 2011.  There were 17% fewer foreclosures in 2011 as compared to 2010 -- which means there are fewer bank owned homes coming on the market.

We'll have to wait a few months to see, but I think it's quite possible we'll continue to see much lower inventory levels than we saw last year.
    

In preparing to list a home for sale, I met with my clients and we examined the competition that their home would have given its characteristics (size, location, age, price).  We were surprised that there were not too many comparable homes (at all) on the market right now.  If someone wants to buy this home, they won't be comparing it side by side with others that are quite similar in size, location, age and price.

One reason why some homes for sale don't have as much competition is because of the overall decline in the number of homes listed for sale.  Inventory levels have dropped 16.5% over the past year, and there are now only 657 homes (single family, townhomes, condos) on the market in Harrisonburg and Rockingham County.

This is good, folks, especially if you are ready to put your house on the market and it is in a decent neighborhood, has been well maintained, and you are able to price it reasonably given market conditions.  If you'd like to examine your competition, just call (540-578-0102) or e-mail me (scott@HarrisonburgHousingToday.com) and we can set up a time to meet.
  

The annual question for those planning (or hoping) to sell their home in the spring or summer is whether to put your house on the market the first week of the year (we'll say Jan 1) or to wait until we're approaching spring (we'll say Mar 1).

It's a double-edged sword --- while there will be more buyers several months from now.... there will also be more sellers, competing with you.

Looking at this year (2011), between January and March:

• There were 21% more buyers in March (75) than in January (62)
• There were 7% more sellers in March (832) than in January (778)

So, while there is more competition with other sellers in March, the increase in buyers is even more significant.  When comparing January to April, the change is even more extreme:

• There were 68% more buyers in April (104) than in January (62)
• There were 11% more sellers in April (865) than in January (778)

So, just when I (might) have you convinced to wait until April to put your house on the market, let me offer up this comparison:

• In January-March this year, an average of 69 buyers committed to buy properties each month.
• In April-June this year, an average of 99 buyers committed to buy properties each month.

Sure, 99 buyers per month makes your odds better than 69 buyers per month --- but it's not as if buyers are completely dormant over the next few months. 

Perhaps the best bet is to examine your house and your segment of the market more specifically.  If you don't have much competition from other sellers right now based on the size, location, price range of your house, let's get your house on the market ASAP.  If you have LOTS of competition right now with very comparable houses for sale, perhaps it makes more sense to wait for a few months.

Feel free to call me (540-578-0102) or e-mail me to discuss whether it makes sense to get your house on the market now, or to wait until March or April.
  

Would you advise your Aussie friends as to whether they're getting a good deal on the house they're buying in Sydney?  Would you want to make sure they were gobsmacked about the price you were paying for a house here in Harrisonburg?

What about New York City?  If your friend was buying a condo in Queens, would you weigh in on what she should pay?  And would you wait anxiously to hear back from her about how how you should price your duplex in Dayton?

How about Richmond?  If your mom lives in Glen Allen, will she get the final call on the price you pay for your new single family home in Harrisonburg? 

I'm sure you have intelligent Australian friends, well-read pals in Queens, and astute parents in other areas of Virginia -- but I challenge you to:

• Remember that this local real estate market (Harrisonburg and Rockingham County) is quite different than all of the aforementioned housing markets.  The glut of foreclosures in Richmond that is driving down prices doesn't drive them down in Harrisonburg.  The deals that home builders are giving away in Northern Virginia doesn't mean that a builder in Harrisonburg will be giving away those same deals.
     
  
• Become familiar enough with the local market to be comfortable making decisions in consultation with your Realtor.  I have seen far too many buyers lead astray by well intentioned parents who live out of town and think they are doing well by their kids to advise them about what they should do and how they should proceed in a real estate deal.

Again, I am sure you have very well intentioned, well informed friends and relatives all around Virginia, the United States, and perhaps the world.  But at some point, we'll need to focus in on the nuances of the Harrisonburg and Rockingham County housing market and make the best decision in a local context.

I am ready to spend as much time as needed with you to help you understand our local housing market and how such an understanding could and should guide your real estate decisions.  Are you ready?

As a home seller, you will face rejection left and right -- many prospective buyers will come view your house and most of them will decide not to buy it.  But how, as a seller, do you make sense of that feedback? 

I often hear the following types of feedback after a showing:

• the house just wasn't quite big enough for us
• we like the house, but have decided we want to live closer to _______
• the house was very nice, but the layout of the bedrooms wasn't ideal

This type of feedback (size, location, floor plan) is difficult to do much with as a seller.  You likely aren't going to build an addition to your house, nor will you physically move the house, nor will you reconfigure the floor plan.  Sometimes the feedback is just a mild objection to be overcome -- did you realize that the unfinished bonus room could be finished quite inexpensively (size) and that the new South East connector will make your commute quite short (location)?  Oftentimes, however, if you receive feedback about size, location or floor plan there isn't much you can do about it as a seller.

I also, however, will hear the following types of feedback after a showing:

• we love the house but we're holding off because it seems overpriced
• the house would probably work for us, but would need so much work
• we like the house, but we're hesitant because it has been on the market for so long

This type of feedback (price, condition, marketing) is completely in your control as a seller.  Many buyers will not make an offer if they think your list price is too far from reality -- adjusting your pricing may be just what you need to either generate more showings, or have a chance of the showings turning into offers.  I almost included AGE as a factor outside of a seller's control, but it's much more about condition -- how well has a property been maintained, and is it in top showing shape so that buyers don't feel overwhelmed by short-term cosmetic updates and long-term maintenance needs?  Finally, if a house has not been marketed thoroughly and effectively, it will likely have a much longer "days on market" than other properties, worrying buyers that perhaps they shouldn't buy the home because nobody else has in the last ten months. 

It is imperative to gain feedback after showings of your house -- but when processing it, try to quickly categorize it as either something you can control, or something you cannot.  Of course, if the feedback is consistently something you cannot control (size, location, floor plan) the answer might be to further adjust what you can control (price, condition, marketing) to compensate for those weaknesses.
     

Remember, when you list your home, you are picking your competitors....

In the above scenario....

• Option 1 leaves you with some chance of selling, but you are on a very level playing field compared to your competitors.  Your house and all others like it are all priced at $170K (+/-).  You shouldn't necessarily expect to win that competition.
• Option 2 leaves you with a great chance of selling.  Your competition (other $160K homes) aren't quite as large of homes, and won't show nearly as well as your home.  You can easily beat your competition here, and sell your house!
  

  

Sellers are usually quite disheartened to receive a low offer on their house, for example, an offer of $250K on a $300K listing.  But it is important to remember that even that low offer really is a complement!

If you have not yet had an offer on your house (that is listed at $300K) and you receive an offer of $250K, that doesn't necessarily mean your house is only worth $250K, nor does it necessarily mean that you should accept $250K or something close to it.  It does, however, mean something quite exciting --- somebody wants to buy your house!!!

Of course, negotiations won't always work out with low offers -- but recognize a low offer for what it is -- a buyer who wants to buy your house, and perhaps the first buyer who has declared as much through a written offer!
 
If there is any way to put a deal together with those buyers, you ought to pursue it, as it's hard to know when the next buyer will work up the courage to tell you that they want to buy your house!
 

In Harrisonburg and Rockingham County, looking at the year thus far (thru Oct 31, 2011)....

• There have been 653 home sales, which is an average of 65 homes per month.
• There are currently 779 homes on the market.

Thus, within 12 months (779 / 65) everybody's house will have sold, right?  Kind of like I have illustrated it below?



Isn't that wonderful news?  Within 12 months, everybody's house will have sold!  Rejoice!  But wait -- each month, while there are homes selling (perhaps 65) there are also new listings (perhaps 65)....



Thus, inventory always stays (roughly) the same, aside from seasonal ups and downs and long term shifts in inventory levels. 

So.....the big question, do all of the houses get in line and sell in an orderly fashion?  If there are 12 months of homes on the market, certainly the first ones to sell are those that have been on the market for 11 months, right?  Because all homes patiently wait in line and let homes that have been on the market longer sell first, right?  First come, first serve?

Nope, things don't work that way in the real estate market.  You don't get "your turn" when it comes to selling your house.  Some houses that sell this month will have been on the market for less than a month.  Some just for two or three months.  And yes, some of the homes that are currently on the market have been sitting there watching sales go by for months or even years.

So, if your house is on the market, make sure you're not thinking that you will just wait your turn, and that eventually it will be your house's turn to sell.  Think about (or talk to me about) what you can do to make sure your home IS one of the next 65 to sell, and doesn't continue to wait around......as the waiting could go on forever!
 

Click the image above to watch a 4 minute video from the Wall Street Journal (and Smart Money) about the state of the current housing market.

From the video....


So, if we believe the above (two months without a sale = problem with price) then it's interesting to note the following about our local market....

803 active residential listings (H'burg, Rock Cnty)

660 of those 803 listings are more than 2 months old

Thankfully, 405 of those 660 listings have had a price change, but many have then gone another two months without selling.

Perhaps it's not true for every property (two months without sale = wrong price) but that logic can certainly be applied to many properties.
  

In many cases, your better option is to keep renting your townhouse --- and doing whatever it takes to find a tenant --- rather than trying to cut your losses via a sale.

In the example above, you could go for years with reduced ($750/m) rent with annual losses of $1800 before you came anywhere close to realizing the full amount of loss realized by a quick sale on day 1.
  

Click here to download my full market report (27 pages, 7 MB, PDF) or read on for highlights....



October was a relatively positive month for the local housing market:

1. Home sales increased 8% in October as compared to last October.
2. Year-to-date home sales increased 3% over 2010 sales levels.
3. Year-to-date median sales prices declined 3% as compared to one year earlier.
4. Average days on market increased by 8%.
   

Despite some negative trends (#3, #4 above) the positive trends (#1, #2 above) are an indication that we are likely in the early stages of recovery for our local housing market.



A strong sign of strength to come in the local housing market, October 2011 was a great month of buying activity, with 84 buyers committing to buy homes in Harrisonburg or Rockingham County.  This marks a 65% increase in buyer activity as compared to October 2010!



Trends are very slow to reveal themselves in annualized sales figures (shown above) because they are an indication of 12-month rolling averages.  That said, it seems that it may be a safe bet that home sales and home prices are on the mend when examining the graph above, which has now been showing increases in these long-term indicators for four months.



Some price ranges are recovering more quickly than others.  The graph above shows that the price ranges under $300K have been starting to see increases in sales over the past several months.  This should eventually roll over into the higher price ranges as buyers move up the price spectrum.



For an even more in-depth look at the Harrisonburg and Rockingham County real estate market, click the image above to download my full market report (27 pages, 7MB, PDF).

If you have questions about the report, or if I can be of assistance to you with real estate that you own, or that you'd like to own, please be in touch.  You can reach me most easily at 540-578-0102 or scott@HarrisonburgHousingToday.com. 
 

Despite starting to see some colder weather (and the first snowfall of the year) October 2011 was a strong month of contracts for Harrisonburg and Rockingham County.  These 84 contracts was a significant increase over last October's 51 contracts -- and at 84 was right in line with May (88), June (84) and July (86).  Wow!
 

Now more than ever, buyers are starting their home search online.  Research (by the National Association of Realtors, and locally) shows that the top three ways that buyers find the home that they purchase are:

• online - they searched on a web site for homes for sale
  
• Realtor - their Realtor told them about the home
  
• yard sign - they drove around a neighborhood they liked and found the home

What does this mean for you?

1. Expect fewer showings.  Many buyers will sort through homes (extensively) online before deciding which homes to visit.  But no, this doesn't mean you should keep additional photos off the internet.
2. Make sure your home shines online.  Excellent (and abundant) interior photos are a must, as this is on of the key pieces of information that is reviewed by a buyer before they visit a home.

   

How important is it to get the pricing right on your house from Day 1?  It is essential for a timely, successful sale, and here's why....

We can't call "do over" if we discover we missed the mark.
In days gone by, sellers would (and could) take their homes off the market (out of the MLS) and then back on the market the following day to obtain a new MLS number, and a new "days on market" figure.  This can't happen any longer -- even if you switch to a new real estate agent or company.  Now, your home has to be off the market for 4 months before the "days on market" will reset.  Thus, if we decide a few months into a listing agreement that our list price was too high, we can't take the property out of the MLS and the put it back in with a new price and a new MLS number.  Thus it will never be seen as a "NEW LISTING" at that "right" price.

Right on Day 1 is much different than right on Day 181
If I recommend that we list your home for $300K and you insist on $325K, then (if I was correct) we missed the mark.  Our Day 1 price ($325K) was too high for the market, because you wanted to "give it a try for a few months" to see if we could sell it for more than we thought.  Then, if we discover six months into our listing period that the price really should have been $300K, we don't have the same opportunity with a re-priced, 180 days on market home listed at $300K as we would have had with a brand new listing, priced just right at $300K.

Peer pressure suggests that old listings have problems
It is not necessarily true at all, but homes that have been on the market for an extended amount of time are seen (by many buyers) to have "problems" -- as these buyers wonder why other buyers haven't jumped at the opportunity to make an offer.  After a decent amount of time on the market, your home will be seen as one that countless other buyers have opted out of buying, so why should this next buyer (the person viewing it tomorrow) think it is a wonderful house to behold?

These are just a few of the reasons why it is so important to get pricing right from the beginning when listing your home.  There are plenty of other reasons, but this should hopefully inspire you to make sure the correct list price is on the home from the start. 

Click here to download my full, 27-page report on the Harrisonburg and Rockingham County real estate market, or read on for highlights....



The housing market in Harrisonburg and Rockingham County continues to show signs of stabilization and recovery:

1. September 2011 home sales (79) were 44% higher than in September 2010 (55).
2. 2011 year-to-date home sales are 2% higher than 2010 year-to-date.
3. Median prices have decreased 4% over the past year.
4. Days on market has increased 10% over the past year.

The positive indicator here is that the pace of home sales is (finally) starting to increase, even though prices are still on a slight decline.  Once the pace of home sales has been increasing for some time, we should see prices start to stabilize as well.



While contracts were down slightly in September (67 compared to 74 last September), contracts year-to-date are up 15%.  Yes, that's right, 15% more buyers have committed to buy properties this year as compared to last year -- indicating that we should see continued strength in closed home sales over the next several months.



Helping to balance the housing market, inventory levels have declined 14% over the past year.



After three years of declining sales pace and sales prices, both metrics are now increasing when examined from an annualized basis. 



If you have questions about the report, or if I can be of assistance to you with real estate that you own, or that you'd like to own, please be in touch.  You can reach me most easily at 540-578-0102 or scott@HarrisonburgHousingToday.com. 
  

Take a look below at your neighborhood.  The houses in black are larger, and have not sold recently.  The houses in red are small, and have sold recently.  Your house is large, and is in blue.  What could you sell your house for today?



Could you sell your home for $295K  Or $290K?  Or even $280K?  Or would the recent lower sales drag the value of your house down because of the recent sales of smaller homes?
 
I have found that in plenty of circumstances similar to the above:

• Sellers believe their house is worth $295K or $300K, and that is probably a realistic value.
• Buyers believe they should be able to buy the house for $265K to $275K.  This shows that they are willing to pay somewhat more for the house since it is larger, but they don't believe the value difference could really be $50K without having larger home comparable sales to examine.
• Refinancing your house could prove to be quite difficult!

What have you experienced?
 

Please bear in mind, this is not related to the price of any homes currently on the market.  It is, however, a reminder that if you are motivated as a seller that it is important that such a motivation carry over into your pricing as well.
  

The following three features or attributes of a home are wonderful to have in a house, but I believe there is a disconnect between how much buyers want these things, and how much they they use them.



For many buyers, a whirlpool tub in the master bathroom is a must!  But I hear from a lot of sellers that they never used their whirlpool tub. 




Buyers are always impressed if the windows in a home can be tilted in to be cleaned.  But sellers often admit that they rarely (if ever) actually took advantage of that easy opportunity for cleaning.




If a backyard has a bit of slope to it, buyers start to shy away from it, longing for a perfectly level backyard for endless hours of sporting fun with their children.  But as a seller pointed out to me yesterday, they rarely see children outside in their neighborhood taking advantage of such a yard.

What do you think?  Are these three items essentials?  Are they overrated?  What else captivates a buyer's attention when they are buying a house, and then is quickly forgotten or taken for granted once they own the house?
  

Perhaps it doesn't always happen with such extreme price variations, but certainly you have had a seller who priced their home very competitively and then was shocked by an extremely low offer brought from someone locally.
 

Everyone knows, the summer is the busiest sales season -- but how does the rest of the year compare?  And is it reasonable to list a home for sale now (in the Fall) or should homeowners wait for Spring?



The graph above shows the percentage of homes that go under contract each month through the year.  Thus, if 1000 homes were available for sale in January, we could expect that 6.9% of them (69) might go under contract that month.

The red line running through the graph shows the average -- on average, 7.7% of available homes go under contract each month in this area.  Thus, the "better than average" months to have your home on the market are March through July.  But....does that mean that homeowners who didn't sell in those months should give up until the following March?  I say no.....

First, on average, 423 homes will go under contract in those better-than-average months of March through July.  But an additional 405 homes will go under contract in the remaining worse-than-average months of the year of August through February.

Second, other than November (6.2%) and December (5.5%) all of the other months show roughly 7% of homes going under contract --- a mere 0.7% lower than the average of 7.7%.

So, homeowners, you need not be depressed from now until next March when the buyers come back out of hibernation.  There will continue to be buyers in the market even if we are currently in the not-quite-so-active months of the market.